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Big Danish banks could face $15B 'Basel IV' impact

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Big Danish banks could face $15B 'Basel IV' impact

A government-appointed expert panel has calculated that Denmark's five biggest banks could incur up to 92 billion Danish kroner, or $15 billion, in additional capital requirements if new global banking rules are implemented, Bloomberg News reported.

The panel looked at Danske Bank A/S, Nykredit Realkredit A/S, Jyske Bank A/S, Nordea Kredit Realkredit A/S and Sydbank A/S, and found their capital needs could rise by between 27% and 39% under so-called Basel IV rules. These are changes to bank capital calculations being sought by the Basel Committee on Banking Supervision, prompted by studies suggesting banks' own internal risk models were being designed to reduce requirements.

The panel opposes higher capital requirements, pointing out that the proposed reforms overlook the comparatively low lending risk in Denmark. A capital floor could also encourage banks to engage in riskier practices, it said.

Finance Minister Kristian Jensen told Bloomberg that the government is trying "everything we possibly can" to reduce capital requirements for the Danish mortgage industry. If the Basel proposals go ahead, the Danish state will ensure the EU works with Denmark to "take into consideration the low risk-weighting of Danish mortgage bonds," he said.

Basel IV rules would restrict the use of banks' in-house models for calculating risk weightings, reform Basel's own standard risk models, and impose minimum output floors for the amount of capital that has to be held against loans and other assets.

The passage of these rules has been in limbo due to opposition from European officials, who are concerned about their potential effect on the European economy.

As of Aug. 10, US$1 was equivalent to 6.34 Danish kroner.